Morgan Barney In The Making (Bloomberg)
The numbers everyone is running with (at this point shit’s fluid people) are $2.5 to $3B cash to Citi, and $5 to $6B in tax incentives. The end deal would have Morgan Stanley controlling 51% of the endeavor. David Trone puts it best:
“You’re selling out the future to get through the crisis of the present, and unfortunately they don’t have a lot of other choice,”
See? Now that leaves you feeling all warm and fuzzy inside, doesn’t it? The combination of the two houses will mean about 22,000 brokers for the newly formed entity (pre-attrition) whereas the Bank of America team is sporting about 20,000 right now.
The Journal points out that closing the deal would lead to a higher probability of seeing James Gorman stepping into Mack’s role, who’s scheduled to retire in 2010.
The biggest hurdle over the course of the integration is going to be retention; the numbers are looking a lot like the ones that ML and Bank of America hashed out – somewhere in the neighborhood of 100% of T12. But, that’s not going to mean shit if the companies come in and step on each other’s toes, which has been known to happen.
Related, on Gorman:
“When Gorman started at Morgan Stanley in February 2006, the firm had about 9,000 financial advisers producing an average annualized revenue of $554,000. Gorman reshaped the business by jettisoning brokers who were less productive and hiring top producers from rivals.
By the end of August 2008, Gorman had whittled the corps of advisers down to 8,500 and raised revenue per representative to $741,000. The firm also almost doubled the assets it managed from the wealthiest customers, those with $10 million or more, to $223 billion from $129 billion. Asset values and revenue per adviser fell in the last quarter of 2008 as markets tumbled.”
Obama SEC Choice Under Fire (NYT)
“Mary L. Schapiro, who appears this week at a confirmation hearing on her selection to head the Securities and Exchange Commission, has been accused in two lawsuits of making misleading statements to quickly complete a merger of regulatory organizations after which she received a 57 percent raise in her pay.”
It’s Monday, an as such I’m not much in the mood to talk politics, but I will say this: with the tightening of regulations and all-eyes-on that the regulatory people are going to have to face, it seems prudent to bring someone into office that’s above reproach.
Possible Banks/Weapons Link Investigated (FT)
There’s an ongoing investigation as to whether or not European banks were stripping wire transfer information in order to hide originating information in a scandal that ultimately has Iran purchasing Tungsten. The metal, it appears, is used in the manufacturing of long-range missiles and the quantity ordered was enough to meet the refrigeration (the other Tungsten use, one would suppose) needs of every home/business in the Middle East.
Madoff Blistered His Sister (NYP)
Of course he did. For $3 million.
GM Warns It’s Coming Back For More (Reuters)
The Downside: “Chief Executive Rick Wagoner said the struggling automaker had enough funding to last through March but could still seek additional U.S. government loans beyond the $13.4 billion it has already been pledged.”
The Upside: “GM has set a goal of reducing its debt by almost $36 billion by asking bond holders to swap out of existing debt for shares and by negotiating new terms for its promised $21 billion contribution to a trust fund for retiree health care that will be run by the UAW.”
In related news, Chrysler has announced it’s not for sale, and that it’s doing its best not to die.
Citi Board Backs CEO as Outlook Worsens (WSJ)
They might lose $10 billion. NBD.
Archive for January 2009
$$$ Disney Plans for Theme Park in Shanghai [WSJ]
$$$ Alabama sheriff to give up profits from jail food [Associated Press]
$$$ US publisher Hearst puts Seattle daily up for sale [Associated Press]
$$$ Boeing Will Cut 4,500 Jobs [Business Week]
Rubin To Pandit: “Let me begin by stressing that I have great respect for you and the job you have been doing in addressing…Citi’s complicated challenges.’
By Bess LevinTo: Citi Employees
From: Vikram Pandit and Sir Win Bischoff
Sent: Friday, January 09, 2009 5:11 PM
Re: Bob Rubin Retirement
It is with considerable sadness that we are letting you know that Bob
Rubin has decided to retire from Citi. This was not a decision Bob came
to lightly, but as he enters his 70s and with all that is now in place
at Citi, he believed the time has come for him to deepen his involvement
in outside activities and organizations to which he has been strongly
committed.
Since Bob joined Citi nearly 10 years ago, he has made invaluable
contributions to the company. From the beginning, Bob has been
instrumental in working with clients around the globe and forging strong
relationships for our businesses. He has also been a trusted advisor to
senior management and the Board, and we are pleased to say Bob has
agreed to continue to be available as a sounding board and resource for
us and the company.
Please join us in wishing him well and thanking him for his years of
service and leadership.
Attached is Bob’s letter for you to read.
As expected, Ezra Merkin is out at GMAC.
You see, Robert Rubin will, apparently, be resigning from Citi.
Update: The Journal has it. To wit:
While Mr. Rubin has defended his performance since joining Citigroup in 1999, insisting that the bank’s problems were due to wider turmoil in the financial system, not failures by Citigroup, he is “tired of it,” a person familiar with the matter said. Mr. Rubin now wants to focus instead on his non-profit work and other outside interests.
Rubin to Leave Citigroup [The Wall Street Journal]
Earlier: Excellent: Job Loss Remains Within Expectations Bogus: Expectations Were Painfully Low
Much Earlier: Citi Hates Holidays, Toys, Tots
Yes, yes, we know, hedge funds are super-evil now, seriously out of favor, and their leaders subject to mob-lynchings if caught in public by any group larger than 10 (or a group of any size containing any member of Henry Waxman’s staff). Despite this, conditions are ripe for a boom in hedge funds. Consider:
1. After this panicked flight to treasuries subsides, there is a lot of cash sitting around with some serious return catching up to do.
2. There’s been a serious manager culling, and lots of redemptions. That money is likely to get hungry again.
3. A massive restructuring of the banking sector is killing any number of proprietary desks. There’s actually a lot of talent around. To wit:
Deutsche Bank AG’s co-head of global credit trading, Boaz Weinstein, is leaving Europe’s largest investment bank to set up his own hedge fund following trading losses in his group at the end of last year.
The departure comes as the Frankfurt-based bank winds down its proprietary credit trading operations. Weinstein, 35, plans to take about 15 colleagues to his new fund early in the second quarter, according to Michael Golden, a company spokesman in London. Colin Fan, who co-led global credit trading with Weinstein, will assume sole responsibility for the unit.
This follows the departure of one of Paulson & Co’s senior professionals to start a fund of his own. Yes, yes, ok, ok, maybe Weinstein isn’t exactly “talent.” Who knows.
4. No one trusts large institutions anymore. Ironically, even Made-off fit that bill. Small, dedicated capital pools with defined strategies, third party administration and even moderate track records are positioned to do very well.
5. All the really big winners in 2008 (ironically) were hedge funds. (E.g., Paulson & Co.)
You heard it here first.
Deutsche Bank’s Weinstein to Leave, Start Hedge Fund [Bloomberg]
As you know, the Madoff boys, Mark and Andy, kinda got gypped on Hannukah this year, cause the presents their mom and dad sent had to be turned over to the authorities, lest Mark and Andy be implicated (assuming they’re not already) in the whole Ponz. thing. Taking pity on the virtual orphans, our big hearted friends at Cityfile mailed the boys a bunch of costume jewelry to Andy’s home at 400 East 84th Street. Nice idea, of course, but apparently they forgot that it’s fishing rods and bait that get these two to drop their panties (don’t think for a second we didn’t realize there was an ulterior motive* behind the generosity). Anywho, I know you all would probably like to give the guys something nice, as well, but are scared of getting caught up in their family’s legal issues, so tell us what you think would be the perfect gifts and we’ll wrap them up and walk ‘em over this weekend.
*It’s called “Fuck A Piece Of History,” my friends, and admit it or not, everyone wants to. Luckily for you, the concept is hurling towards earth in late ’09 in the form of a sort of kissing (except in this case, fornicating) booth, once the boys start running low on funds.
Oh, this has got to chap Dick Fuld’s hide. Hugh “Skip” McGee III, the former head of investment banking at Lehman Brothers, who supposedly “pushed [the Gorilla] from the center of power” after forcing the CEO to fire long-time gal-pal Joe Gregory, is reportedly getting $50 million for two years of work at BarcLehs. Though a former colleague (Callan) is apparently “feeling nauseous right now even thinking about McGee’s deal,” we would like to say, well-played my friend. Skippy was one of three senior execs who worked on the deal to sell the Brohamsters’ assets to Barclays and clearly had the prescience to shove potential suitor Bank of America into the arms of Merrill Lynch, obviously anticipating that Barney Frank would one day throw a hissy fit over TARP-taking banks dolling out big bags of money to senior execs.
Update: A person familiar with the matter tells us the $50 million in compensation is non-existent, and based on rumors from back in September.
*Yes, we are fully aware of the fact that BAC was running for the door the second it got a wiff of Lehman’s grab bag of venereal diseases, and LEH was *supposedly* upset about that, but none of you can say for certain that Skippy didn’t tip them off about the herp.
It’s true. He’s going.
No, no. Not Madoff. Raju.
Satyam scam: Ramalinga Raju surrenders; arrested [NDTV]
A judge is set to rule as early as today if Bernie Madoff must leave the comforts of house arrest at 133 East 64th Street and head downtown but we want to know now, damn it! On the one hand, prosecutors say he should ’cause, among other things like the matter of a $50 billion Ponzi scheme, Madoff showed “disregard for the law” by sending out a little over a million dollars worth of jewelry to family and friends. On the other, they were just Hannukah gifts! Because of this legal sitch he’s supposed to just up and forget the eight crazy nights? This whole thing is going to be over soon and when it is he’s not going to be the grandfather that stiffed his grandkids, who we all know whole grudges for years. You would’ve done the same. Anyway, since you people are nothing if not magesterial prognosticators, ahead of the decision I want you to look into your crystal balls and tell me:
